The currency auction, the Bank of Albania bought 230 million euros this year

The Bank of Albania held last week the fifteenth annual auction for the purchase of currency.

The amount planned to be purchased in the first round of the auction was between five and ten million euros, while the Bank of Albania made purchases in the upper range, for a total of 10 million euros.

The purchases in the first round were made at a rate that was between 103.84 and 103.97 ALL. The weighted average rate of purchases in the first round was ALL 103.91.

The Bank of Albania also exercised the purchase option in the second round, for an additional amount of 6.5 million euros, with the average purchase rate in the first round, of 103.91 ALL. In total, the amount purchased at the auction on November 17 reached 16.5 million euros.

The offer of the participants in the auction this time turned out to be quite high, for a total value of 21.3 million euros.

Even the November auction witnessed the abundant supply of Euros in the foreign exchange market, while the exchange values ??at the auction were the lowest reached since August. The amounts offered in the auction by the banks were very close to the spot (current) rate, which proves that they do not expect major changes in the exchange rate of the Euro with the Lek even in December.

The last auction was of the forward type, with a one-month deadline. The Bank of Albania is applying forward auctions for the third year in a row, with the aim of encouraging the use of this instrument in the interbank and private markets. Out of 17 auctions planned this year, eight of them are forward type.

The Bank of Albania decided in August to increase the planned purchases of Euros in the domestic foreign exchange market to a range between 220 million euros and 300 million euros, from the previous range of 160 million-220 million euros.

This decision came as a way to withdraw the large amount of currency from the market and to restrain the further strengthening of the Lek. Although in theory foreign exchange auctions are carried out in the service of the administration of the foreign exchange reserve, in practice the Bank of Albania has decided to use this mechanism also in the function of intervention in the foreign exchange rate.

According to calculations, so far the Bank of Albania has bought more than 230 million euros in foreign exchange auctions held for 2023. However, it is estimated that the short-term impact of these auctions on the exchange rate has not been very significant. Despite the increase in the amount purchased at auctions by the Bank of Albania, the lek has continued to remain in strong positions, and even during the month of November, it dropped again to the lowest levels since the middle of August. Until the end of this year, the Bank of Albania has planned two more auctions, which will take place on December 6 and 20.

Purchases of foreign currency by the Bank of Albania are part of the auction program for the management of the foreign exchange reserve and under normal conditions are not intended to affect the exchange rate.

According to the statistics of the Bank of Albania, at the end of the 9th month of 2023, the foreign currency reserve of the country had the value of 5.73 billion euros. The value of the foreign currency reserve has increased by 13.3% or 671 million euros compared to the same period of the previous year. /MONITOR